Helping our suppliers live our values

For us to be responsible in our dealings with customers, we must seek to know that the businesses that supply us with our goods and services are acting according to the same principles and standards as us. In many cases, we're one link in a long and complex supply chain. It's difficult to guarantee responsible behaviour in all the links, so it's important that we articulate a clear role for ourselves as a more responsible procurer. Here's what we're doing to put that in place.

New ways to work

As a first step, we've established a code of conduct, based around the broader Virgin Group's approach to sustainable procurement. It outlines the standards we want our major new suppliers to meet in the future. In addition we shall also be asking our key existing suppliers to subscribe to this code of conduct, where we consider it appropriate.

Tackling issues together

We think it's important that we work with our suppliers, where necessary, to generate behavioural change or improve their performance on these issues. If we get it right with those suppliers then they are more likely to begin generating positive change in their supply chains.

What we're focusing on

The code of conduct specifically focuses on two issues that we believe generate the greatest cause for concern: labour standards and environmental sustainability. We're using the responses we've received, and our evolving understanding of the sustainable procurement agenda, to test whether these are the right areas to focus on and where, therefore, the critical areas of risk and opportunity in our supply chain reside.

Communicating our expectations to suppliers

We want to ensure that, over time, all our suppliers have a clear understanding of our expectations in relation to labour standards and environmental sustainability. We'll also consider the inclusion of relevant questions in our tendering processes to cover these areas.

The probable risks

We're anxious not to over-complicate our analysis. Our instinct is telling us that our first area of focus should be on the hardware we procure because it involves the consumption of materials and resources and therefore could be manufactured in ways that are socially and environmentally problematic. When we have finished looking at hardware we will then begin to investigate other areas.

We're also asking questions about where our equipment is being made since, as we've learned from the International Labour Organisation (ILO) and the Ethical Trading Initiative (ETI), some parts of the world present significant problems when it comes to environmental and labour standard issues.

What we're doing

The challenge now is to start talking to the relevant key suppliers that fall into these two big areas of concern so that we can begin testing some of the assumptions we've described above. We're challenging each area of our procurement function to identify suppliers that fall into these categories or that present any other particular cause for concern from a sustainable procurement perspective, so that we can establish where to channel our efforts.

At this early stage in our journey it's important to us that we identify the issues where we are most able to use our purchasing ability to change behaviours in our supply chain.We also know that meaningful supplier engagement requires us to be able to conduct audits of suppliers (i.e. more formal, structured investigations) when necessary. Our objective this year is to ensure that every area of our procurement function has the necessary experience to identify the key issues when they present themselves.

Over time we would want to be able to conduct an audit of the relevant key suppliers around our sustainable procurement priorities (sometimes referred to as 'social auditing').

Some areas of procurement have already begun the process of auditing suppliers in the interests of delivering better environmental performance including, for example, those relating to consumer equipment and our fleet of vehicles. We want to ensure that we're capturing the lessons and experiences gleaned through these activities and focusing all of our social auditing efforts around the core priorities highlighted above.

Bit by bit

We know there's no point in trying to understand our whole supply chain in one fell swoop. That's just not possible. At this stage, it's simply a case of being really clear as to where our specific priorities are and who we need to work in partnership with to really add value in our supply chain. We look forward to explaining those priorities, and our progress in addressing them, more explicitly in next year's report.